The Senate Report on the ACNC: It’s still an elephant!

The release of the Senate Report into the ACNC Repeal Legislation reveals that there are powerful groups, with unrivalled access to the Minister’s office, that do not want the scrutiny of an independent body like the ACNC, writes Professor Ann O’Connell, from the Not-for-profit Project, Melbourne Law School.

The report of the Senate Economics Legislation Committee on the Australian Charities and Not-for-profit Commission (Repeal) (No 1) Bill 2014 on June 16 predictably recommended that the Bill be passed.

The Committee’s inquiry allowed many of those disillusioned at having their views ignored an opportunity to make their case in favour of the ACNC again. But despite the overwhelming support for the ACNC, the views of the sector are falling on deaf ears.

The report written by Senator Bushby for the Senate Economics Legislation Committee in relation to repeal of the Australian Charities and Not-for-profit Commission Act 2012, as predicted in an earlier opinion piece, has recommended the repeal of the Act and so the abolition of the ACNC.

There are, however, two dissenting reports – one by the two Labor members of the Committee and one written by Senator Siewert on behalf of the Greens. The report written by Senator Bushby does not therefore represent the views of the majority of the Committee although it does presumably represent the views of the other members – Senator Eggleston (Liberal) and Senator Williams (Nationals).

Now that the report has been published it is interesting to pause and consider what has happened to date. When the proposal for a national, independent regulator was first announced in 2010, not surprisingly, Kevin Andrews, now Minister for Social Services opposed it. His argument, then as now, was that the sector did not need “more regulation”.

Fast forward to 2013 when it became apparent that the Coalition would win the election, the majority of those in the NFP sector who had come to believe that the ACNC was not only tolerable but also a positive for the sector began asking Mr Andrews to reconsider his view. Many people assumed that once he became aware of the level of support for the ACNC his views would (perhaps reluctantly) change.

In the lead up to the election, Mr Andrews repeated that the ACNC would be abolished although this never became part of the Liberal party’s published election policy.

In the 10 months since the election it has become apparent that there is no persuading the Minister about the value of a body like the ACNC despite the fact that:

• It was first proposed in 2001 by the Charities Definition Inquiry established by John Howard;
• Detailed investigations by the Henry Review (2009) and the Productivity Commission (2010) resulted in support for an independent regulator to replace the ad hoc arrangements previously in force;
• Extensive consultation with the sector resulted in a model that was infinitely better than its predecessor, but still evolving; and
• (Perhaps most importantly) the ACNC was strongly supported by the sector in a very public way. This has included surveys of key stakeholders, a public letter signed by a large number of bodies and individuals who had been involved with the reform process for many years and now the overwhelming majority of submissions to the Senate Committee inquiry.

Throughout this process, two matters have been perplexing. First, why would the Minister persist in his views in the face of such significant support for the ACNC by the NFP sector?

Secondly, why has the process been so shoddy – the lack of public consultation, the denigration of respected individuals and the appalling lack of detail in the ACNC (Repeal) (No 1) Bill?

The release of the Senate report provides the answer to the first question: there are powerful groups, with unrivalled access to the Minister’s office, that do not want the scrutiny of an independent body like the ACNC.

When it became apparent that there was not to be a public consultation as promised in a media release published in December on the website of the Department of Social Services, I started contacting those who I had worked with over the last 10 years to see what could be done. One person associated with the Catholic Church told me that he had had a two-hour meeting with people from the DSS and he was sure that they would continue to consult.

It didn’t happen. Indeed at a meeting convened by the Not-for-Profit Project at Melbourne Law School in February this year, representatives from the DSS said that there would be no public consultation.

Churches represent less than 1 per cent of all registered charities but are part of a group that, until the arrival of the ACNC, had no obligation to make disclosure in relation to the receipt of tax concessions. The churches have been so successful at lobbying governments that even under the previous government “basic religious charities” were excluded from the reporting obligations under the ACNC Act.

Another group of entities that have had no reporting obligations are charitable trustees. They represent approximately 12 per cent of registered charities. At the Senate Committee hearings they were represented by the Financial Services Council, not a body you would normally associate with charities.

The argument put by this group was that they were dealing with private money and should not have to report to any government bodies. The answer to this is that as the money has been left to “charitable purposes” it is a matter for government as to whether those purposes are being met – the person who decided to leave their money to be applied for such purposes can no longer do so. Furthermore, registration as a charity is voluntary and if a trustee does not want to have to report they need not do so. They will however then be obliged to pay tax on the trust income.

The Senate Committee hearing identified another group in favour of abolishing the ACNC – bodies such as the Medical Research Institute and Universities Australia, who pointed to the significant disclosure they already make. The ACNC Commissioner has already stated that such bodies can simply submit reports prepared for other bodies but that the public interest is best served if the public can look in one place to identify the bona fides of potential deductible gift recipients, namely the ACNC Register.

In essence, in the absence of any other explanation it would appear that the reason the Minister will not change his mind is that he is acting in the interests of those entities that do not want to make disclosure to the public about their activities.

The second perplexing matter, concerning the process adopted by the Minister and his department, is even more disheartening. The lack of consultation with the sector generally fits in with the view that more powerful forces are at play. Rather strangely though the department has tried to give the appearance of having consulted, answering a question on notice from a Senate Estimates Committee about consultation by including the names of people who clearly had not been consulted.

Another disheartening development has been the dismissal of the views who have “skin the game”. This includes the comment by the Minister in March in relation to the public letter supporting the ACNC that it only contained 54 signatures. This is also apparent in the report written by Senator Bushby which virtually ignores all the evidence presented to the committee and relies heavily on the views of a chartered accountant who has not been involved in any of the consultations over the past decade and, as noted by the ACNC in its supplementary submission, did not get his facts right.

There were also other aspects of the Senate inquiry that were of concern – the tardiness in publishing all the submissions, the selective choice of those invited to appear to give evidence and the mind-boggling withholding of one submission until the Sydney Catholic archdiocese had responded to it!

The most troubling aspect of all though is the lack of respect for Parliament displayed by the skimpy bill and Explanatory Memorandum. It will be a sad day for democracy if the Parliament passes a Bill that allows the Minister to name the ACNC’s successor agency through delegated legislation.

The answer to the question of why the process has been so shoddy appears to be that the Government is disregarding the views of the majority in the NFP sector simply because it can. As one person from the Minister’s office put it: “we won the election.”

Robert Fitzgerald is currently chair of the ACNC Advisory Board but a highly respected participant in the NFP reform process for more almost two decades having been a member of the Charities Definition Inquiry and the Productivity Commission.

He noted that it has taken 17 years, at least six reports and more than 2000 submissions to get to an effective regulator. In his view the Senate report if adopted would “undermine basic transparency, the tackling of duplicative reporting and proven and effective regulation”.

The government may say it is abolishing the ACNC in order to support the NFP sector but most of us can see that what the Minister is calling a duck is really an elephant.

About the Author: Professor Ann O'Connell is a member of the Not-For-Profit Project at the Melbourne Law School at University of Melbourne. She was also a member of the NFP Tax Reform Working Group.